Tax Assessment Overturned: Procedural Fairness Mandates Proper Hearing and Recalculation of GST Liability Under Sections 73 and 74

HC ruled that tax liability under Section 130 of Uttar Pradesh GST Act was improperly quantified. The ex parte order was quashed, directing tax authorities to provide the petitioner a fair hearing and reassess the tax demand in accordance with Sections 73 and 74. The court emphasized procedural fairness and correct statutory interpretation in tax assessment proceedings.

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Issues involved:
The quantification of liability under the Uttar Pradesh Goods and Service Tax Act, 2017 u/s 130 was challenged as impermissible in law. The order impugned was passed ex parte, raising concerns about the petitioner's non-appearance before the authorities despite opportunities given.

Judgment Details:

Issue 1 - Quantification of Tax Liability under Section 130 of the Act:
The petitioner challenged the quantification of liability under Section 130 of the Act, arguing it should be done u/s 74 instead. Referring to a previous judgment, it was emphasized that the tax demand can only be quantified as per Section 73 or Section 74 of the Act. The Court held that the exercise under Section 130 for tax assessment and penalty determination was not stipulated under the Act, rendering the impugned order unsustainable. It was noted that the liability to pay tax arises at the point of supply, and the contravention of provisions should be coupled with an intent to evade payment for penalty under Clause (iv) of sub-section (1) of Section 130.

Issue 2 - Ex Parte Order and Non-Appearance of Petitioner:
Although the order was passed ex parte, the petitioner did not appear before the authorities despite multiple opportunities. The petitioner's counsel argued compelling grounds for non-appearance. The Court acknowledged the petitioner's contentions but emphasized the importance of granting a hearing before passing a reasoned order. Consequently, the impugned order dated December 7, 2023, was quashed and set aside, with a direction for the authority to provide an opportunity of hearing to the petitioner.

In conclusion, the writ petition was disposed of with the direction to set aside the impugned order and ensure a fair hearing for the petitioner before passing a reasoned decision.

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